Chinese coal and iron ore imports up MOM as zero-covid loosens
According to Chinese customs authorities, Chinese coal imports came in at 32.3 MMT in November, up 10% MOM but down 8% YOY bringing YTD 10.3% lower YOY. YTD coal imports now stand at 262.4 MMT, compared to 292.3 MMT in 2021, 264.9 MMT in 2020 and the 5-year average of 274.7 MMT.

Iron ore imports came in at 98.8 MMT in November, down 6% YOY but up 4% MOM, bringing YTD 2.2% lower YOY. November imports are broadly in line with 2020 figures and have recovered significantly since the 5-year low in February. Chinese iron ore imports YTD now stand at 1,016.9 MMT, versus 1,038.4 MMT in 2021, 1,073.4 MMT in 2020, and the 5-year average of 1,009.6 MMT.

China’s State Council today reported 10 new guidelines, which will loosen some restrictions under its stringent zero-Covid policy. We highlight the new guidelines will allow for home quarantine for asymptomatic and mild Covid cases, in addition to mostly scrapping Covid testing for entering most public places. The authorities further urge areas which are not designated high-risk to not restrict citizens movements or to close businesses. Hence, the announcement provides some assurance towards a gradual re-opening for the Chinese economy, which should support several shipping segments heading into 2023.

Overall, recovering iron ore imports show signs of improving economic activity on the back of the Chinese governments’ tangible reopening efforts and support to the country’s struggling property sector. We note iron ore prices are up ~30% since the trough in end-October, as expectations for stronger steel and iron ore demand improves amidst a shift away from strict zero-covid policy compliance.

Dry bulk: Vale’s 2023 iron ore guidance broadly in line with 2022 guidance
In relation to the company’s capital markets day, Vale guides for 2023 iron ore production between 310 and 320 MMT. For 2022, the company estimates c310 MMT of iron production, hence in the lower end of its previous guidance of 310-320 MMT. In our July 2022 sector report, we had forecast Brazilian exports to increase c25 MMT versus implied increase of 0 to 10 MMT from the guidance. Vale guides for 340-360 MMT of iron ore production in 2026, increasing to above 360 MMT beyond 2030. We see the updated guidance as a potential negative for dry bulk demand next year but highlight potential upward revisions to production guidance should China continue its reopening efforts into 2023.